What will happen in 2019

By Alasdair Whyte
January 7, 2019 11:31

As
we start 2019, it is hard to remember another year when so many forecasters are
predicting a downturn.

And there is a lot of ammunition for pessimists. The year 2018 was the worst
12-months for US, UK and European stock indices since 2008. Investors and
analysts are concerned about the potential fall-out from the US-China Trade
War; US interest rate rises; and Europe ending quantitative easing. There are
too many geopolitical risks to list.

Some analysts are even warning that years that end in nine often have big
changes. They argue that 1789 saw the French Revolution; 1919 the end of the
First World War; 1929 The Wall Street Crash leading to the Great Depression;
1939 the start of the Second World War; 1979 the Iranian Revolution; and 1989
the fall of the Berlin Wall. Although this theory does not account for massive
changes not happening in 1799, 1809, 1909, 2009 and so on – or huge events in
1912 and other years not ending in a nine.

With this gloomy backdrop in mind, here are the key themes for business
aviation in 2019:

US buyers will
continue to dominate
There are still lots of American buyers who are planning to buy an aircraft in
2019. US equity markets may be skittish, but the firm link between
share prices and business jet deliveries stopped working in 2009 (maybe that
was the key change for that year).

We would argue that business confidence is more important. In
November last year, the NFIB said that US small-business confidence was on
a record run. Today’s job figures are another boost. Nothing lasts forever, but
it is too early to write-off the US. There is still lots of confidence out
there.

Although there are some bright spots – Brazil could be one – demand in the rest
of the world is patchier. It looks set to be a tough year in China (as Apple’s
recent announcement shows) and the Middle East. Demand in Europe may be flat –
although UK operators are confident that they can cope with Brexit.

Business jet
deliveries will rise moderately
Aircraft manufacturers will deliver more aircraft in 2019. Bombardier and
Gulfstream will increase production of their Global 7500 and Gulfstream G500
aircraft.

The year will also see the delivery of exciting new aircraft including the
Cessna Citation Longitude, Global 6500, Global 5500 and the Praetor 600. The
first Airbus A319neo and Boeing BBJMax8 will also be completed.

But the key thing is that OEMs are not getting carried away with production –
which is a great thing for when the downturn really hits.

Utilisation will be
flattish
WINGX data coming out next week will show 2018 was a record year for
business aircraft flights, although growth slowed in the last six months. The
next 12 months are probably likely to be pretty flat – perhaps up by a few
percent if we are lucky. Anyone around in 2009 and 2010 will take that.

NextGen
This time next year aircraft in the US will need to be equipped
with ADS-B Out to fly. It is clear that not every aircraft will make
this deadline – but some owners seem happy with this so the year 2020 could see
a significant number of aircraft being scrapped.

So perhaps not as upbeat as last year’s very
accurate forecast. As we said in
August, winter is coming (it always comes), but 2019 will not see the full
freeze.

Best wishes for a Happy, Healthy and Prosperous 2019 on behalf of me, Louisa
and the Corporate Jet Investor Team.